Short-sale plan will pay you to move
A ReMax bus stops on a tour of foreclosed homes Las Vegas, Nev.
TEXT OF INTERVIEW
Bill Radke: The administration has been trying for months to figure out how to deal with the millions of homeowners at risk of foreclosure. Barney Frank, the Democratic chair of the Housing Financial Services Committee, sent a letter last week to banks pressuring them to fast-track mortgage modification programs. Next month, a new plan goes into effect -- one that will pay people to move. Details are starting to come out. Marketplace's Alisa Roth is live in our New York bureau to explain. Hi, Alisa.
Alisa Roth: Good morning.
Radke: We have heard a lot about mortgage modifications plans. This is different, how would this work?
Roth: The idea of this latest plan is to encourage homeowners accept a short sale. That's where you sell the property for less than the amount that's left on the mortgage. So to do that, the government says it'll pay $1,000 to the bank that's in charge of the mortgage. If there's a second mortgage on the property, the government will give up to $1,000 to the bank that holds it. And finally, it'll pay the homeowner $1,500 in what it's calling relocation assistance.
Radke: Now we have been hearing about short-selling since the housing market starting crumblinb. What is so compelling about it?
Roth: In the reality of today's market, short sale is probably a pretty good deal; the bank gets more money than it would from a foreclosure. For borrowers, it's probably less damaging to their credit reports than a foreclosure would be. And obviously for communities, it's better not to have foreclosures and empty properties around.
Radke: And what about any downsides, apart from obvious that financial loss?
Roth: Yeah, that. Some critics say there's just too much potential here for fraud. The other problem, probably the bigger problem, is that the bank that services the mortgage often isn't the same one that actually owns the mortgage. So it's going to take some negotiating with the institution that actually owns the mortgage in order to get these plans to work.
Radke: Marketplace's Alisa Roth in New York. Thanks Alisa.
Roth: You're welcome.